Draft Intellectual Property Policy of the Republic of South Africa – Phased Implementation – IP and Public Health – Part III

On August 25, 2017, the Draft Intellectual Property (IP) Policy (Draft IP Policy) of the Republic of South Africa was published for public comments by November 17, 2017.  This Draft IP Policy follows from the IP Consultative Framework that was approved by the South African cabinet on July 6, 2016.  In this multi-part series, we address the need for the policy, the goals, the strategies to meet the goals, and the phases of implementation.  In the third part of this series, we focus on the phased implementation of the Draft IP Policy as it relates to IP and Public Health.  In part one, we provided an introduction and the goals of the Draft Intellectual Property Policy.  In part two, we provided information on the strategies and key reforms of the Draft IP Policy.

In order for the South African government to pursue urgent action in certain areas, conduct further in-depth study and consultation in other areas, and respond to a fast-evolving discipline, the Draft IP Policy will be implemented using a dynamic, two-phase approach.  Phase 1 will focus on:  1) IP and Public Health; and 2) International IP Cooperation.

The key components of IP and Public Health are as follows:

  • Local manufacture and export in line with industrial policy;
  • Patent–substantive search and examination;
  • Patent opposition;
  • Patentability criteria;
  • Disclosure requirements;
  • Parallel importation;
  • Exceptions;
  • Voluntary licensing;
  • Compulsory licenses; and
  • IP and competition law.

“International Cooperation” refers to the international treaties that South Africa will consider joining.  Specifically, South Africa will explore legal instruments and international treaties that are critical to advance the objectives of the Draft IP Policy. These will include:

  • Locarno Agreement Establishing an International Classification for Industrial Designs (1968);
  • Strasbourg Agreement Concerning the International Patent Classification (1971);
  • Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks (1973);
  • Nice Agreement Concerning the International Classification of Goods and Services for Marks (1979);
  • Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (1989); and
  • Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled (2013).

Phase 2 will focus on:

  • Intellectual Property Rights (IPRs) and the informal sector;
  • Branding of South African goods and services (collective marks, certification marks and GIs);
  • Safeguarding South Africa emblems and national icons;
  • Commercialization of IP;
  • Enforcement;
  • IP localization and beneficiation;
  • IP awareness and capacity building;
  • IPRs and the environment/climate change/green technologies; and
  • IP in agriculture, IP and biotechnology, genetic resources and genomic sovereignty.

As mentioned previously herein, this post will focus on phase 1, specifically, on IP and Public Health.  A future post will focus on phase 2.

a) Local manufacture and export in line with industrial policy

An overreaching goal of the Draft IP Policy will be to increase the local production of pharmaceuticals to meet domestic needs in South Africa.  In addition, the increase in production will lead to export opportunities throughout Africa and beyond.  This aspect of Phase 1 is in line with the National Development Plan (NDP), as well as the National Industrial Policy Framework (NIPF), and implemented through the Industrial Policy Action Plan (IPAP).  Substantive policy recommendations that follow in the NDP are designed to boost local production and export.  It has been recommended that additional policy measures be implemented, so that domestic industry is encouraged to take full advantage of the opportunities offered in the Draft IP Policy.

The pharmaceutical industry is one of the priority sectors identified by Industrial Policy Action Plan (IPAP).  The pharmaceutical market in South Africa is a two-tier pharmaceutical market, which is divided into a public and a private market.  This market is the largest in Sub-Saharan Africa, and worth a total estimated R40 billion (approximately $3 billion USD) annually.  However, the South African pharmaceuticals sector is still relatively small by international standards.  This sector constitutes a mere 0.4% value and 1% volume of the global market.  The contribution of this industry to South Africa’s GDP has also declined from 1.6% to 1.1% over the past six years.  Despite the decline, the sector provides direct employment to approximately 10,000 people, and the downstream segment provides approximately 25,000 jobs.  Thus, there is tremendous potential for this sector to grow and contribute value-added jobs to the South African economy.  The availability of employment opportunities is critical to whether a student or researcher channels her or his efforts toward a particular scientific area.  Thereupon, growth of the pharmaceutical production sector is important to developing and maintaining the science and technology community in South Africa.

Growth of the South African pharmaceutical industry will also contribute to the sustainability of supply and allow the country to fulfil key health objectives as outlined in the National Drug Policy.  Specifically, the growth of the industry will ensure the availability and accessibility of essential drugs.  Currently, approximately 65% of the demand for pharmaceuticals in South Africa, by value, is met by imports.  It has also been reported that medical products are the fifth largest contributor to South Africa’s trade deficit.  Imported pharmaceuticals have played an important role in improving public health.  However, increasing locally produced pharmaceuticals in South Africa will ensure the availability of medications specific to the country’s unique disease burden.  In order to treat many of the diseases in South Africa, medications are needed that require specific active pharmaceutical ingredients (APIs), of which global supply is limited.  Therefore, formulating an appropriate IP Policy and implementing the corresponding legal framework will contribute to significantly strengthening the local industry and meeting local needs.

b) Patent–substantive search and examination

Currently South Africa employs a deposit system for patent applications.  Therefore, patent applications are not subjected to a substantive search and examination (SSE) procedure.  A discussion on the proposed SSE was discussed in part two of this series.

c) Patent opposition

Currently, there is no opposition procedure in South Africa.  A patent may only be challenged after grant in an application for revocation, which must be brought before the Commissioner of Patents who is a High Court Judge.  Patent oppositions afford an opportunity for public intervention in the patent application process.  The Draft IP Policy recommends that participation in the process be made open in order to maximally benefit the state and South African industry.  Optimally, opposition proceedings will be enacted in the law, both prior to and after, the grant of a patent.  In the interim, owing to capacity constraints, the Draft IP Policy recommends that South African patent law recognize a third-party submission system or “observation” to stand in place of the pre-grant opposition process and that existing provisions in administrative law to be used in lieu of post-grant oppositions.

By their nature, opposition proceedings can achieve a range of policy aims in respect of substantive patent examinations.  Importantly, such proceedings seek to ensure that only those inventions that meet domestic statutory requirements for patentability are granted patent protection. Given the purpose of such proceedings, no legitimate public purpose would be served by limiting the class of persons who may participate.  Put differently, no specific standing requirements should have to be met in order to oppose the grant of a patent.  From the perspective of the South African government, the choice of recognizing any particular opposition proceeding has implications for human and financial resources. Thus, the third-party observation mechanism is the least resource-intensive, as it does not trigger any specific procedure involving the third-party once the relevant information has been submitted.  Pre-grant opposition proceedings are potentially more resource-intensive as they require the South African government to put in place an administrative procedure that makes provision for the active participation of applicants and third-parties.  However, by harnessing available information and expertise relevant to the application for or grant of a patent, the state’s resources may effectively be supplemented.

The IP Policy aims to make a provision for a third-party observation mechanism in terms of which all self-identified parties would be entitled to make written submissions opposing the grant of any particular patent.  A provision will also be made for a post-grant opposition mechanism that would require the development and promulgation of regulations.  This would allow all such oppositions to proceed by way of administrative review, in accordance with the provisions of the Promotion of Administrative Justice Act 3 of 2000 (“PAJA”).  This provision would be available for as long as the contemplated system of post-grant opposition is not yet in force.  In addition, a legislative provision has been suggested  to allow for the introduction of pre-grant opposition proceedings once the Minister of Trade and Industry is satisfied that there is sufficient capacity within the substantive examination system to make appropriate use of such proceedings.

d) Patentability criteria

The Draft IP Policy states that, in line with emerging best practice, patentability criteria will be developed in order to promote genuine innovation through the patent system in South Africa, and the criteria will be implemented through the process of patent examination.  The criteria should form part of the Patents Act and also regulations and guidelines for patent examination.  The Draft IP Policy states that Article 27.1 of the TRIPS agreement allows South Africa the flexibility to interpret and implement patentability requirements in a manner consistent with its constitutional obligations, developmental goals, and public policy requirements.  Amongst other things, this would include the adoption of patentability criteria that address the country’s health and environmental concerns, as well as industrial policy objectives.  The Draft IP Policy mentions Australia, which in 2012 adopted legislation that upwardly adjusted the standards of patentability in Australia.

e) Disclosure requirements

Applicants are required to adequately disclose the nature of the invention therein, in order to gain a full and fair understanding of a patent application.  To assist in the process of examination of such applications, in addition to the existing disclosure requirements in the Patents Act, it is recommended that Applicants be asked to provide information regarding the status of similar and related applications filed in other international jurisdictions.

The Draft IP Policy provides that in terms of Article 29(1) of the TRIPS agreement, an Applicant for a patent disclose the invention in a manner sufficiently clear and complete for the invention to be carried out by a person skilled in the art. The patent law in South Africa already provides that a complete patent specification must sufficiently describe, ascertain and, where necessary, illustrate or exemplify the invention and the manner in which it is to be performed.  The Draft IP Policy recommends that Applicants be asked to provide information regarding the examination of corresponding patent applications in other countries.  This will assist the examiners during the search and examination procedure.

f) Parallel importation

South Africa’s unique developmental needs, particularly in public health, require the exploration of every legal opportunity to support the viability and expansion of the public health system.  In the case of patented products, such as medicines, this includes the ability to purchase said medicines from any external territory that is necessary.  The implementation of parallel importation will be undertaken in a controlled manner pursuant to consultations with respective stakeholders.

The parallel importation of medicines in South Africa is governed by the 1997 amendments to the Medicines and Related Substances Act 101 of 1965 (Medicines Act).  This legislation is administered by the National Department of Health (DOH).  The relevant provision applies notwithstanding any rights conferred in terms of the Patents Act.  A narrow interpretation of section 45(2) of the Patents Act in its current form could potentially give rise to challenges, should parallel importation be pursued.  Thus, there is a need to clarify that parallel importation of medicines in the manner prescribed in the Medicines Act does not constitute an infringement of the Patents Act.  Doing so would allow Ministries responsible for specific sectors to sanction sector-specific parallel importation in a controlled manner.  This importation would be pursuant to consultations with their respective stakeholders.  The result would be striking a balance between access and the interests of nascent industries.

g) Exceptions

The TRIPS Agreement explicitly states that the objective of promoting and enforcing IPRs is to contribute to the promotion of technological innovation and to the transfer and dissemination of technology.   This is to be done to the mutual advantage of producers and users of technological knowledge alike, and in a manner conducive to social and economic welfare, thus achieving a balance of rights and obligations.  As a means of striking a balance between the rights of owners and users of IPRs, Article 30 of the TRIPS Agreement allows members to provide limited exceptions to patent rights.  The Draft IP Policy mentions Bolar exemptions and research exceptions.  The Bolar exemption allows a party to obtain regulatory approval for a product prior to the expiry of a patent covering the product.  Currently, the South African Patents Act does not include a research exemption.  The Draft IP Policy appears to go further than a research exemption, stating, with reference to pharmaceutical products, that it is essential to facilitate research, development and testing of IP products in the commercial and industrial sectors prior to the expiry of the patent term.

 h) Voluntary licensing

A voluntary license occurs when a patent holder offers, on his or her own accord, a license to a third party to produce, market, and distribute the patented product.  In the South African public health context, the third-party has tended to be a domestic generic producer, or the Medicines Patent Pool (MPP), which acts as a public health intermediary to ensure generic producers voluntary licenses with access-friendly terms and conditions.  The Draft IP Policy recognizes that voluntary licensing has contributed to generic competition, lower prices and accessibility, particularly where antiretroviral drugs (ARVs) used in the treatment of HIV/AIDS are concerned.  The document recommends greater transparency in respect of the terms of these licenses, and encouragement to conclude such license agreements.

 i) Compulsory licenses

Draft IP Policy mentions that compulsory licenses are an important mechanism to ensure affordability of essential goods and to restrain anti-competitive practices.  The grant of a compulsory license is subject to an expensive judicial process and infers that there should be a less expensive and less complicated administrative process to apply for a compulsory license.  The Draft IP Policy mentions that, currently Section 4 of the Patents Act entitles a Minister of State to use an invention for public purposes, but requires negotiation on conditions of use, and if agreement cannot be reached then the State may approach the Commissioner of Patents to determine the conditions.  The Draft IP Policy suggests that prior negotiations and determination by the Commissioner of Patents should not be required, and that the law should be amended so that the State can take advantage of flexibilities provided in the TRIPS agreement.  The Draft IP Policy states that the South African Government is fully aware of the limitations of “Paragraph 6”, and will engage stakeholders to find ways of ensuring simpler implementation.  This is a reference to the implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health which relates to compulsory licenses for local manufacture and export.

 j) IP and Competition Law

The Draft IP Policy mentions recent competition law cases involving IP and public interest.  In 2001, instead of using the provisions of the Patents Act, a complaint was lodged with the Competition Commission against pharmaceutical companies which held patents on a number of ARV pharmaceuticals in South Africa.  This led to a settlement and the patentees agreed to license the patents to South African pharmaceutical companies and, as a result, these pharmaceuticals have been made available successfully in SA.  The Draft IP Policy recommends the clarification of the scope of intersection between competition law and IP.  In this regard, the document states that both competition law and patent law can be used to implement competition-related TRIPS flexibilities and advance consumer welfare.

Please continue to watch the BRIC Wall Blog for the remainder of the series on the Draft Intellectual Property Policy of the Republic of South Africa.

This post was written by Lisa Mueller and Kate Merath of Michael Best and David Cochrane of Spoor & Fisher.

 

Is compulsory licensing of generic medicines coming to the Russian Federation?

As discussed in previous posts, at least twelve countries have issued compulsory licenses for a variety of pharmaceutical pharmaceuticals (See, Part 1 and Part 2 of our series on compulsory licensing in India).  On December 19, 2014, S. Kalashnikov, the Chairman of the Committee of the State Duma for Health Protection, sent to D. Medvedev, the Prime Minister of the Russian Federation, a letter regarding compulsory licensing.  Given the current geopolitical and economic situation, the State Duma Committee for Health Protection is considering implementing compulsory licensing for certain high-tech and biotech medicinal products for the treatment of orphan diseases and disease having the greatest impact on mortality in the Russian Federation.  A translation of the letter is provided below.

To: PrimeMinister of the Russian Federation

D.A. MEDVEDEV

Dear Dmitry Anatolyevich!

Currently, some countries began to actively use the mechanism of compulsory licenses for the production of generic medicines before the expiration of patent protection for the original medicinal product (India, Brazil, Indonesia, Thailand, etc.). The governments of the aforementioned countries are supported by the provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the Doha declaration on the public health. According to these documents, compulsory licensing mechanism is applied in the case of severe social requirements and is used for the production of medicinal products to treat common serious diseases in the country such as AIDS, hepatitis, cancer, and also in the event of an epidemy.

In the current geopolitical and economic situation, the State Duma Committee for Health Protection deems it necessary to consider the implementation of compulsory licensing mechanism for the production of some high-technological and biotechnological medicinal products for the treatment of orphan (rare) diseases and diseases that have the greatest impact on mortality in the Russian Federation.

Sincerely  yours,

Chairman of the Committee

S.V. Kalashnikov

Please watch the BRIC Wall Blog for updates on compulsory licensing in the Russian Federation.

This post was written by Lisa Mueller.

Nigeria Patent Protection: The Basics – Part 2 of a 2-Part Series

This is Part 2 of a two-part posting examining patent procurement and enforcement in Nigeria. You can view Part 1 by clicking here. This post examines working requirements, revocation proceedings, compulsory licenses and infringement.

Working Requirements

The invention described in a patent must be worked within four years of the date of filing of a patent application in Nigeria or three years from the issue date of the patent, whichever occurs later. Failure to work a patent in Nigeria may lead to the granting of a compulsory license (discussed in more detail below).

Revocation Proceedings

Any interested person or party can request the Federal High Court invalidate a patent based on any of the grounds listed in the Patents and Designs Act No. 60 {which is now the Patents and Designs Act (Act)}.  Specifically, a patent can be invalidated if:

1.  The subject matter is not patentable (for example, the subject matter lacks novelty and/or inventive activity);

2.  The description does not sufficiently describe the invention and/or the claims do not define the scope of protection or exceed the limits of the description; and/or

3.  A patent for the same invention has already been granted in Nigeria based on a prior application or an application entitled to an earlier filing date.

Compulsory Licenses

A compulsory license may be granted if:

1.  The patented invention is not being worked in Nigeria;

2.  The extent of the working does not meet the demand for the patented invention on reasonable terms;

3.  Working in Nigeria is being hampered by importation of the patented invention; and/or

4.  The establishment or development of industrial or commercial activities in Nigeria is being hampered by a lack of working of the patented invention.

A compulsory license can also be granted where a later patent cannot be worked without infringing an earlier issued patent (provided that the later patent constitutes technical progress or serves a different industrial purpose than the earlier patent).

Infringement and Enforcement

According to the Act, a patent confers on the patentee the right to prevent any other person from conducting the following acts:

1.  The making, importing, selling or using of the patented product;

2.  Stocking the patented product for sale or use;

3.  For process patents, the using or applying of the patented process; and/or

4.  Performing any of one or two with respect to a product obtained directly from a patented process.

However, exceptions to the above include:

1.  Acts not done for industrial or commercial purposes;

2.  Acts done with respect to products covered by a patent that are lawfully sold in Nigeria; and/or

3.  Acts done in Nigeria in good faith from a date prior to the filing of the patent application or the foreign priority date of the patent application (or if “serious preparations” have been made with a view of manufacturing a product or applying a process).

In Nigeria, the claims are used to determine infringement and the description (the specification and drawings) is used to interpret the claims.

The Federal High Court has exclusive jurisdiction for all patent infringement actions, and the remedies available to a successful patentee in an infringement action include:

1.  An injunction;

2.  Damages; and/or

3.  An accounts of profits.

Intellectual Property Jurisprudence & A Growing Legal Fraternity

During the last several years, a number of patent infringement lawsuits have been decided by the Federal High Court, giving credence to the fact that intellectual property jurisprudence is developing fairly well in Nigeria.

There is a growing legal fraternity of very well educated practitioners, most of whom have had overseas training.

An example of a patent infringement lawsuit in which a patent was found to be valid and infringed is Pfizer Limited v. Tyonex Nigeria Limited and Ebamic Pharmacy Limited (Federal High Court, January 23, 2007).

This case involved a Pfizer patent claiming amlodipine besylate, which was being sold in Nigeria under the brand name “NORVASC.” The defendants imported a generic version of this drug from Turkey and marketed it as “AMLOVAS.” Pfizer lodged a complaint with the appropriate regulatory authority in Nigeria, which moved swiftly to de-register the generic product, arrest the Managing Director of the first defendant company, and seal the premises of both defendants for one week.

In addition, the Federal High Court considered the validity and infringement of Pfizer’s patent and decided in favor of Pfizer, granting an injunction and damages accordingly.

Please watch the BRIC Wall for future updates on any patent litigation in Nigeria.

This post was written by Lisa Mueller and Nicky Garnett of Adams & Adams.

To read Part 1 of this two part blog, please click here.

Understanding Compulsory Licenses in India – Part 1 of a 2-Part Series

On March 4, 2013, India’s Intellectual Property Appellate Board (IPAB) upheld the country’s first compulsory license to a pharmaceutical product.  Specifically, the decision upheld a compulsory license issued to Natco Pharma Ltd., an Indian generic drug manufacturer, to sell Bayer’s patented chemotherapy drug Nexavar® (sorafenib tosylate).  Given the economic consequences of this compulsory license, Bayer is expected to further appeal this decision.  It is important for companies procuring patents and doing business in India in all industries to understand the country’s compulsory licensing laws.

A compulsory license is a statutorily created license that allows certain parties to use or manufacture a product encompassed by the claims of a patent without the permission of the patent owner (patentee) in exchange for a specified royalty.  The Indian Patent Act (Act) contains very broad compulsory licensing provisions.  The two provisions of the Act that allow for compulsory licenses are Sections 84 and 92.

Section 84

Under Section 84, the Controller of Patents can issue a compulsory license three (3) years after the issuance of a patent if one of the following conditions is met:

1.  The reasonable requirements of the public with respect to the patented invention have not been satisfied; or

2.  The patented invention is not available to the public at a reasonable price; or

3.  The patented invention is not worked in India.

Public Accommodation: The Act contains a list of circumstances in which the “reasonable requirements of the public” will be considered not met.  These are:

1.  The patentee does not grant a license on “reasonable terms” thereby causing: (a) a disadvantage to a trade or industry or the development or establishment of an industry in India; (b) demand for the patented product not to be sufficiently met or available on reasonable terms; (c) insufficient supply or development of a market in India for the exportation of the patented article; or (d) a disadvantage in the establishment or development of commercial activities in India.

2.  The patentee imposes conditions with respect to the grant of license, sale or use of a patented product or process, the manufacture, use or sale of non-patented materials or the establishment or development of any trade or industry in India, which is prejudiced.

3.  The patentee includes one or more of the following conditions in a license:  (a) an exclusive grant-back clause for any improvements developed by the licensee on the patented product or process; (b) a clause prohibiting the licensee from challenging the validity of the licensed patent(s); or (c) a clause that is essentially a “coercive” package license (namely, requires the licensee to purchase non-patented items from the patentee as a condition of the license).

4.  The patentee does not work the patented invention in India to the fullest extent possible or on a commercial scale to an adequate extent.

5.  The working of the patented invention on a commercial scale in India is being prevented or hindered as a result of the importation of the patented invention by:  (a) the patentee or a person authorized by him; (b) persons purchasing from the patentee, either directly or indirectly; or (c) the infringement of the patent by a third party against whom the patentee is not taking or has not taken any action to eliminate said infringement.

Reasonable Price: With respect to the patented invention not being available to the public at a reasonable price, a compulsory license will be granted if a patented invention is not being made available to the public at an affordable price.  For example, Bayer was selling Nexavar® for about Rupees 280,000 (around US $5,160) per month compared to Natco selling the drug for about Rupees 8,800 (around US $162) per month.

Worked in India: With respect to a patented invention being worked in India, a compulsory license will be granted if the patented invention is not worked in India.  An invention is considered to be “commercially worked” in India if the patented invention is: (a) manufactured in India; (b) imported into India; (c) licensed and forms a part of a product that is sold in India; or (d) commercialized in India in any other manner.

Interested Person: Any person interested may file an application for a compulsory license in the Indian Patent Office three (3) years after the grant date of a patent.  A “person interested” is interpreted broadly under the Act and includes a licensee of patent for which a compulsory license is sought.  The application must include the nature of the interest of the party filing for the license, the facts supporting the application and license conditions (royalty rates, etc.) the applicant is willing to accept.

Controller Review: The Controller will review the application and if satisfied that a prima facie case has been made will direct the applicant met the requirements to grant the license, will send a copy of the application to the patentee or any other person having an interest in the patent.  The application for the compulsory license will be published in the official journal of patents.

Within two (2) months of publication in the official journal, the patentee (or any other person) may file a notice of opposition opposing the application.  The notice of opposition must state the grounds of the opposition, the terms and conditions of a license that would be acceptable to the opponent and any evidence necessary to support the opposition.  A copy of the notice of opposition is provided to the applicant for the compulsory license.  A hearing is conducted during which both parties will have the right to be heard.  After each party is heard, the Controller will make his/her decision on the compulsory license.

If after the Controller’s review of the application he/she is not satisfied that a prima facie case has been made, he/she will notify the applicant.  The applicant may then request a hearing within one (1) month from the date of such notification.  If the applicant does not request a hearing, the application for a compulsory license will be refused.  If the applicant files a request for a hearing, a hearing will be conducted and after hearing, the Controller will make a decision on whether or not to allow or refuse the compulsory license.  If the Controller decides to allow the compulsory license, the patentee or other person having an interest in the patent will be notified and the procedure described above will be followed.

After deciding to grant a compulsory license, the Controller will determine the terms and conditions of the license.  For example, in the case involving Nexavar®, a non-exclusive, non-assignable license was given Natco.  In addition, the Controller initially awarded Bayer a royalty of 6% for sales of Nexavar® by Natco.  The IPAB increased this royalty to 7%.

To read Part 2 of this blog, click here.

Thanks to the Chadha & Chadha firm for providing their insights to the BRIC Wall on compulsory licensing.